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The Morning Ledger: Companies Cheer Renewed Tax Credits

The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning. Send us tips, suggestions and complaints: david.hall@wsj.com and matthew.quinn@wsj.com. Get The Morning Ledger emailed to you each weekday morning by clicking here.

Fourth-quarter earnings may look a little rosier for some companies thanks to some of the tax credits squeezed into the fiscal cliff deal. Technology and drug companies are cheering the decision to retroactively extend the R&D credit, which expired in 2011. And financial firms could get some tax relief from the extension of a credit for overseas financing activities, CFOJ’s Emily Chasan writes.

Other companies have been maneuvering to avoid being hit by tax increasesGoldman Sachshanded directors and executives — including CEO Lloyd Blankfein — a total of $65 million in restricted stock just hours before the higher tax rates took effect, the WSJ reports. Blankfein, President and Chief Operating Officer Gary Cohn and outgoing CFO David Viniar each received total vesting of 66,065 shares worth $8.4 million. Goldman joins a long list of companies — includingCostcoLas Vegas Sands and Dillard’s – in doling out accelerated special dividends at the end of last year.

Meanwhile Moody's warned that the fiscal cliff deal didn’t do enough to cut the deficit, the WSJ notes, saying that “further measures that bring about a downward debt trajectory over the medium term are likely to be needed to support the AAA rating.” Business leaders seemed to agree. “There’s a bit of a reaction of, ‘Is that all there is?’ Because there’s a lot that remains to be done,” John Engler, the president of the Business Roundtable, told the Washington Post. Martin Regalia, chief economist at the U.S. Chamber of Commerce, worried that the deal — by locking in current marginal tax rates — will complicate efforts to reduce rates and eliminate deductions as part of a broader tax overhaul.

THE DAY AHEAD:

The shortened week means that we get the ADP jobs report on the same day as weekly claims. The December ADP survey is expected to show 150K private sector jobs created – up from 118K in November. And weekly jobless claims are seen rising to 363K from 350K last week.

Markets flash. Asian markets ended mostly high, but Europe is lower as the initial euphoria from the fiscal cliff deal gives way to concerns that lawmakers have just kicked the can down the road. DJIA futures are flat.

EXCLUSIVE ON CFOJ:

Low rates drag down corporate pension funding. Despite a rising stock market and enhanced employer contributions, corporate pension plan funding levels declined again in 2012, leaving most plans significantly underfunded, reports Emily Chasan. In a Towers Watson review of the 429 largest U.S. companies that sponsor defined benefit plans, corporate pensions were only 75% funded in aggregate, down from 78% in 2011. Though pension assets performed better during the year, it wasn’t enough to offset the increase in liabilities stemming from low interest rates used to calculate outstanding pension obligations.

CORPORATE NEWS:

BofA aims to ramp up corporate lending.Bank of America CEO Brian Moynihantells the FT that he’s directed bankers to be “more aggressive” in lending to companies. His comments come amid new-found confidence at the bank. BofA ended 2012 as the best performer in the DJIA, with a 109% increase in the stock, the FT notes. Mr. Moynihan also signaled that BofA wants to settle outstanding lawsuits. “Our job is to get them put away at a reasonable basis for shareholders,” he said.

Google revs up social-network push.Googleis gaining ground against Facebook thanks to a controversial tactic: requiring people to use the Google+ social network, writes the WSJ’s Amir Efrati. People who create an account to use Gmail, YouTube and other Google services are also being set up with public Google+ pages that can be viewed by anyone online. It’s part of an aggressive push by CEO Larry Page to prevent Facebook from dominating the social-networking business. The integration has helped jump-start Google+ usage and executives say more integration is coming. “Google+ is Google,” says Vice President Bradley Horowitz. “The entry points to Google+ are many, and the integrations are more every day.”

Ethan Allen turns the tables on China.Ethan Allen and Ashley Furniture are doing something different—exporting U.S.-made sofas and furniture to China, writes the Journal’s James R. Hagerty. Most furniture Ethan Allen sells in China is made in its seven plants in the U.S. and Mexico. Ashley mostly relies on furniture made at its own plant near Shanghai and elsewhere in Asia, but it ships small amounts from its eight plants in the U.S. Shipping furniture from North America to China seems counterintuitive, given the distance and China’s network of furniture factories and parts suppliers. But Ethan Allen CEO Farooq Kathwari says Chinese furniture plants aren’t set up for customized upholstery choices that Ethan Allen emphasizes. For now, he said, Ethan Allen can handle that custom business from North American plants.

Why Zipcar was stuck in a rut.Zipcar‘s proposed $500 million sale toAvis Budget appears to represent an entrepreneurial high point. But a sale at $12.25 a share is less than half what investors were paying immediately after its IPO, notes the WSJ’s Dennis K. Berman. Zipcar CEO Scott Griffith saw a potential $10 billion market, but Zipcar’s problem was that it didn’t have the resources to test that thesis, Berman says. Cash on hand at the end of September was $65 million. It had already borrowed $97 million to finance its cars. To expand deeper into Europe would take more resources than the company had at its disposal. That’s why Avis Budget’s entry could transform what Mr. Griffith called a “business model company” into a money-making enterprise.

Utilities scramble to cope with waning electricity use. Americans are using more electronic gadgets, but their electricity use is barely growing, posing a daunting challenge for the nation’s utilities, the WSJ says. Companies likePublic Service Enterprise Group andNortheast Utilities are pouring money into high-voltage transmission lines because regulators let them to collect above-average returns on those outlays to boost investment in aging power networks. Others are slashing spending, including Exelon, which is cutting investment in nuclear-plant expansions by more than $1 billion and in renewable-energy projects by $1.3 billion from now until 2015 as it tries to avoid a credit downgrade. “Even with all the actions we’ve taken, our balance sheet is stressed…and we have no other meaningful levers to pull,” Exelon CEO Chris Crane told investors in November. He added that the company might have to slash its dividend.

Al-Jazeera bolsters presence in U.S.Al-Jazeera is buying Al Gore’s Current TV in a move that will boost the Qatar-based broadcaster’s footprint in the U.S. Terms weren’t disclosed, but analysts estimated the deal could be worth as much as $500 million, Reuters reports. Just buying Current doesn’t guarantee instant distribution, the Los Angeles Times notesTime Warner Cable, which offered Current in roughly 10 million of its homes, is dropping the channel. Without Time Warner Cable, which is the largest distributor in New York City and Los Angeles, Current TV is in only about 50 million homes.

GLOBAL ECONOMY:

China’s services sector on the upswing. China’s services industries expanded at the fastest pace in four months, adding to manufacturing gains that may help sustain an economic rebound this year, Bloomberg reports. The non-manufacturing purchasing managers’ index was at 56.1 in December after a 55.6 reading the previous month. A reading above 50 indicates expansion.

CFO MOVES:

Progress Softwarehired Chris E. Perkins as its chief financial officer. He succeeds Melissa H. Cruz, who plans to retire after assisting with the transition, according to a press release. Mr. Perkins was most recently CFO of Eclipsys Corporation. Ms. Cruz was hired as CFO in July 2012 with a base salary of $375,000, a bonus target of $275,000, and a 115,000-share stock grant, according to an 8-K.

Beacon Roofing Supplyelevated Chief Accounting Officer Rick Welker to acting chief financial officer. He succeeds David Grace, who retired at the end of 2012. Mr. Welker joined Beacon in 2004 as controller and was promoted to chief accounting officer in 2011. The company has hired a recruitment firm to assist with the search for a permanent CFO. Mr. Grace received compensation in 2011 valued at $1.3 million, according to the most recent proxy filing available.

Endologixhired Shelley B. Thunen as its chief financial officer. She succeeds Robert J. Krist, who is retiring. Ms. Thunen was most recently associate general manager of Alcon LenSx Inc. Mr. Krist received compensation in 2011 valued at $444,584, according to a proxy filing.

Deloitte's Financial Reporting Alert discusses certain key accounting and financial reporting considerations related to the current economic conditions in the eurozone and Puerto Rico, including a summary of financial reporting implications that would result from a country's decision to exit the eurozone and an outline of disclosures recommended by the SEC in 2012 about European sovereign debt.